No Review of Preemption of Truckers' State Law Claims

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By Kevin McGowan

Oct. 13 — Denying a petition filed by a California trucking firm, the U.S. Supreme Court Oct. 13 declined to review a California appeals court ruling that federal transportation law doesn't preempt truckers' state law meal and rest break claims.

The justices left intact a California Court of Appeal decision affirming a nearly $1 million judgment for a class of 72 drivers employed by Oakland Port Services Corp. on claims the company failed to pay them for all hours worked, wrongly classified some as trainees and routinely prevented drivers from taking legally required meal and rest breaks.

By denying review, the court declined an opportunity to decide the extent of federal preemption of state rules requiring interstate trucking companies to give drivers regularly scheduled breaks at the risk of state fines and civil lawsuits. The justices earlier this year denied review of a U.S. Court of Appeals for the Ninth Circuit decision that raised similar preemption issues (Penske Logistics, LLC v. Dilts, No. 14-801 (2015).

The state court rejected Oakland Port Services' argument that the Federal Aviation Administration Authorization Act (FAAAA) preempts California's meal and rest break requirements. The California Supreme Court declined to review the appeals court ruling.

In seeking U.S. Supreme Court review, Oakland Port Services, which operates as AB Trucking, said the preemption standard used by the state court and Ninth Circuit conflicts with Supreme Court precedent. The appeals court ruling “turns decades of settled precedent on its head” and gives state laws that apply generally to all employers “virtual immunity” from the intended federal preemption of laws affecting interstate carriers, the company argued.

Opposing review, the truckers said the state court “faithfully applied” Supreme Court precedent to reach a correct result.

State Followed Ninth Circuit Test

The FAAAA, codified at 49 U.S.C. § 14501(c)(1), provides that a state “may not enact or enforce” a law “related to a price, route or service of any motor carrier” respecting the “transportation of property.”

In Dilts v. Penske Logistics, LLC, 757 F.3d 1078, 22 WH Cases2d 1636 (9th Cir. 2014) , the Ninth Circuit ruled California's meal and rest break laws weren't preempted as applied to drivers who deliver and install home appliances. 

The state appeals court endorsed the Dilts standard that the FAAAA preempts only state laws directly related to motor carriers' rates, routes and services. Since California's meal and rest break laws apply generally to all employers and bear only a “tenuous” relationship to rates, routes and services, the federal law doesn't bar applying the state law requirements to Oakland Port Services' drivers, the state court ruled.

Congress Intended Broad Preemption 

But the company argued the Ninth Circuit's test, as applied by the state court, runs afoul of Supreme Court precedent that gives federal transportation law a wide preemptive scope.

The federal law's purpose is to avoid patchwork regulation of interstate motor carriers that would undo the effects of federal deregulation, Oakland Port Services said.

The Ninth Circuit and state appeals court erred by ruling a state's generally applicable meal and rest break requirements aren't the type of laws “related to” prices, routes and services that Congress intended to preempt, the company said.

The Supreme Court has ruled preemption applies if the state law has a “significant impact” on an interstate motor carrier's operations, the company said. Only state laws that affect a carrier's rates, routes or services in a “tenuous, remote or peripheral” manner aren't preempted, the company said.

By adopting an “elevated standard” for federal preemption of state laws that apply generally to employers, the Ninth Circuit and state appeals court disregarded the FAAAA's “plain text” and Supreme Court precedent, the company said.

The Ninth Circuit's formulation that preemption doesn't apply if state law requirements don't “bind” a motor carrier to specific routes, rates or services or “freeze into place” a carrier's prices, routes or services directly conflicts with Supreme Court precedent, the company said. The Supreme Court has held Congress intended broad preemption of state regulation of motor carriers, the company said.

The state court also erred in ruling a trucking firm must make a detailed factual showing regarding the effects of state law before federal preemption applies, the company said.

Four federal appeals courts—the First, Fifth, Seventh and Eighth circuits—have correctly held state regulations' effects “must be scrutinized as a matter of logic and judicial common sense” instead of requiring companies to quantify the effects “in either temporal or dollar terms,” Oakland Port Services said.

“The heightened standard of proof” imposed by the California court “would make it virtually impossible to arrive at a single rule” applicable to all motor carriers nationally or even within the state, the company said. That would undermine Congress's objective of uniform regulation of interstate motor carriers and provide “no predictability whatsoever” to the businesses involved, the company said.

Preempted Under Correct Test 

Under the correct standard, California's meal and rest break regulations are preempted by federal law because they have “a direct and significant impact” on motor carrier operations, Oakland Port Services said.

“[T]hese regulations do not merely affect the relationship between employer and employee; they alter fundamental aspects of the way in which [Oakland Port Services] can structure its dealings with customers and respond to myriad external constraints,” the company said. “[T]hese regulations cannot be dismissed as ‘tenuous, remote or peripheral.' ”

Supreme Court review is critical because numerous class actions raising the same preemption issues currently are pending in California federal and state courts, the company said.

Absent Supreme Court review, California-based motor carriers will be forced to adhere to “far more stringent break rules” than companies based in other states, putting California companies and the ports they serve at a competitive disadvantage, the company said.

“Such a re-regulation of the trucking industry by the states through a patchwork of conflicting laws is precisely what the FAAAA sought to avoid,” the company said.

Kenneth M. Weinfield of Chauvel & Glatt LLP in San Mateo, Calif., was counsel of record for Oakland Port Services Co.

No ‘Significant Impact' Shown 

In a brief opposing review, the drivers said the state appeals court ruling is consistent with Supreme Court precedent that the federal transportation law preempts only state laws that have a “significant impact” on carrier rates, routes or services.

Neither the state court nor the Ninth Circuit in Dilts erred by ruling that California's meal and rest break regulations, which have been in effect for more than 80 years, aren't preempted because they don't significantly impact trucking firms' rates, routes or services, the drivers said.

“These courts directly followed the Supreme Court's precedents when they concluded that California's meal and rest break laws survive preemption because they ‘do not set prices, mandate or prohibit certain routes, or tell motor carriers what services they may or may not provide, either directly or indirectly,' ” the drivers said.

The justices denied review in Dilts, in which the Department of Transportation submitted an amicus brief concluding the federal transportation law doesn't preempt California's meal and rest break regulations. The state appeals court ruling endorsing Dilts conforms the California state courts' preemption analysis with the Ninth Circuit's test, the drivers said. As in Dilts, no Supreme Court review is warranted, the drivers said.

Theodore Franklin of Weinberg Roger & Rosenfeld in Alameda, Calif., was counsel of record for the drivers.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Summaries of labor and employment law cases denied Supreme Court review appear in Section E.